Eurozone proposes global bank tax

The Euro sculpture stands in front of the European Central Bank, right, in Frankfurt, Germany, on Friday, Dec.16, 2011. Poster underneath the Euro sign reads: Let's talk about Future. (AP Photo/Michael Probst)

TheDC spoke with economic and policy analysts from three free-market think tanks on two continents. They all dismissed the idea.

Sam Bowman, an analyst with London’s Adam Smith Institute, told TheDC in an email that “The chances are zero” of a global banking tax “as long as Zurich, Singapore, Hong Kong, Wall St and the City are all in existence: The governments of all of those financial centres will block one.”

Heritage Foundation senior research fellow David John, has already testified before the Senate Finance Committee in opposition to the tax. The chance that the European experiment will spread across the globe, he said, is “somewhere south of nil.”

Competition between cities that are home to financial markets, he said, will all but guarantee that capital will flow wherever such taxes are not in force.

Still, in agreeing to the bailout of many of its weakest members, the Eurozone is on the precipice of moving forward. The treaty that includes the new tax must be ratified by each of the member countries; but if it passes, it will create a new launching pad for the fee’s global spread. And more power will be transferred from the parliaments of individual European nations to the EU headquarters in Brussels.

Noting Geithner’s coldness to the idea of a global bank-transactions tax, Cato Institute senior fellow Dan Mitchell noted some irony in an interview with TheDC. “From what I understand,” he said, “President Obama is on the right side of this issue.”

If Obama and Geithner are on the right side, however, the United Nations is not. “If we have a global financial transaction tax, say of 0.5 percent,” UNAIDS director Michel Sidibe told Reuters last week, “we will have $226 billion. Ten percent of that resource is enough for financing the fight against HIV/AIDS,”

Heritage’s John dismisses this idea. “They [the UN] don’t have the power to levy such a tax.”

Rep. Defazio remains hopeful that Congress will do what the UN cannot.

“I voted against the absurd bank bailout and the Bush Administration’s cowboy capitalism, markets-know-best, deregulation-at-all-costs policies,” he said when he and Sen. Harkin proposed their bills.

“We cannot wait for the next bubble to pull us out of the recession … This legislation will ensure Wall Street pay for needed investment to get our country back on track”.

But Cato’s Mitchell said that while the Democrats’ success might make the Occupy movement happy, it will only serve to distort financial markets — sending dollars, Euros and other currencies where they wouldn’t otherwise go on their own.

“I want financial markets to chase the most efficient forms of capital,” he told TheDC. “Such a tax merely gets in the way of that endeavor and perverts that process.”

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